Approximately half of all treatment seeking Veterans with posttraumatic stress disorder (PTSD) have problems with alcohol, yet it is unclear how current alcohol use affects critical processes mediating recovery from trauma. Despite strong preclinical evidence that recent, heavy alcohol exposure adversely impacts fear extinction, and that fear extinction is central to recovery from PTSD, the direct effects of current, problematic alcohol use on fear extinction have not been characterized in those with PTSD and alcohol use disorders (PAUD). Similarly, contextual fear processing, or the accurate discrimination of threat in the environment, is implicated in the maintenance of PTSD but has never been explored in PAUD. Severe symptom profiles, small treatment gains, and high treatment dropout rates in Veterans with PAUD underscore the need to understand the effects of current heavy drinking on the mechanisms of fear extinction and contextual fear processing. Without studies accounting for the influence of alcohol on processes central to PTSD recovery, treatment innovation for PAUD is likely to remain limited. Previous work and preliminary data from our lab suggest that individuals with PTSD have specific deficits in fear extinction and recall, and that the ventromedial prefrontal cortex (vmPFC), hippocampus (HPC), amygdala, insula, and dorsal anterior cingulate cortex (dACC) play critical roles in the inhibition and expression of fear processing. Moreover, our preliminary data show that current problematic alcohol use in the context of PTSD is associated with higher treatment drop-out and fewer treatment gains from exposure-based relative to coping skills therapy, potentially suggesting an extinction-specific impact of alcohol use on clinical outcomes. While preclinical models provide compelling mechanistic evidence that chronic alcohol exposure disrupts fear extinction and recall, as yet there is no clinical analogue to this work. Relatedly, contextual fear processing is abnormal in PTSD, and damage to the hippocampus (HPC) impairs this process. Tasks used previously to assess contextual fear processing may not reliably invoke HPC dependent processes, and none have assessed the impact of alcohol despite the known deleterious impact of alcohol on HPC structure and function. In the proposed design, we will compare Veterans with PTSD and ongoing, heavy alcohol use (“Drinking” or D-PAUD) to those with 30- to 90-days of sustained abstinence (A-PAUD) using a validated 2-day protocol of concurrent psychophysiological and functional brain imaging measures of fear acquisition, extinction learning, extinction recall, as well as a newly validated configural threat learning measure of contextual fear processing that invokes HPC dependent processes. We predict that Veterans with D-PAUD will show physiological response indicative of greater fear recovery, and neural response consistent with decreased fear inhibition (i.e., less vmPFC activation) during fear extin...